Selasa, 05 Juli 2011

Bulk Commodities - No more tough times for the Coal Miner’s Daughter - Citigroup

 New pricing paradigm for coal — The demand for coal from the energy and steel sectors appears to be unrelenting and is likely to keep coal prices elevated for the foreseeable future. With large parts of the industry handicapped by infrastructure constraints, it's being left up to too few producers to meet the strong demand from developing economies. This will leave the coal market exposed to sudden price spikes and a new premium on supply as disruptions become common place.
 Demand rising from developing economies — Despite the modest outlook for advanced economies, we think that the strong EM growth should keep global growth buoyant, at 3-4% this year and 2012, and even higher thereafter – well above the long-run norm of just below 3% YoY.
 Coal still king in energy markets — We have increased our price forecasts for thermal coal by between 13-45% over our new 10 year forecast. Thermal coal's share of the electricity generating capacity is rising, not only in Japan and Germany (after the nuclear crisis in March) but also in developing economies. China and India are becoming significant importers as domestic production in both countries lags behind demand.
 Metallurgical coal at a premium, but past peak — As developing economies (outside of China) boost steel consumption over the next decade, demand for premium hard coking coal will likely remain strong. With new sources of supply scarce, we believe HCC prices have permanently jumped up to a new level. Therefore we have increased our forecasts of prices in 2014-2018 by an average of 15%.
 Long Term Price Upgraded — We have raised our LT thermal coal price to $105/t based on rampant (and permanent) cost inflation. Our new LT HCC price of $200/t reflects our views that the industry's high margins (~50%) are here to stay as a lack of new supply creates a high barrier to entry.